Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - NGL Energy Partners LP | a11-31395_28ka.htm |
| EX-99.2 - EX-99.2 - NGL Energy Partners LP | a11-31395_2ex99d2.htm |
| EX-99.1 - EX-99.1 - NGL Energy Partners LP | a11-31395_2ex99d1.htm |
Exhibit 99.3
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction
The following represents the unaudited pro forma condensed consolidated balance sheet of NGL Energy Partners LP (“we”, “NGL” or “the Partnership”) as of June 30, 2011 and the unaudited pro forma condensed consolidated statement of operations for the year ended March 31, 2011, and for the three months ended June 30, 2011. NGL was formed in September 2010. As part of our formation, we acquired and combined the assets and operations of NGL Supply, Inc. (“NGL Supply”), Hicks LLC and Gifford (collectively, “Hicksgas”) with an effective date of October 1, 2010. We became a public company in May 2011 and filed our first Form 10-K for the six months ended March 31, 2011. NGL Supply was the deemed acquirer for accounting purposes in our combination; therefore, the financial statements of NGL Supply for all periods prior to our combination became our prior period financial statements.
As discussed further below, subsequent to June 30, 2011, we had the following transactions which have a significant impact on our financial position and results of operations:
· In August 2011, we amended our credit agreement to increase our total facility to $330 million, consisting of a $130 million working capital facility and a $200 million acquisition facility and extended the final maturity to October 1, 2016, except for a $30 million portion of our working capital facility that terminates in February 2012.
· On October 3, 2011, we closed a business combination transaction with E. Osterman Propane, Inc., its affiliated companies and members of the Osterman family (collectively, “Osterman” or “the Osterman Associated Companies”) for retail propane operations in the northeastern United States. We issued four million common units and paid $96 million in exchange for the receipt of the assets and operations from Osterman. We have previously filed Form 8-K/A to provide the financial statements of Osterman and the required pro forma financial statements on December 19, 2011.
· On November 1, 2011, we closed a business combination transaction with SemStream, L.P. (“SemStream”) for substantially all of SemStream’s natural gas liquids business and assets. We issued 8,932,031 common units and paid approximately $93.1 million in exchange for the receipt of the assets and operations of SemStream.
The accompanying unaudited pro forma condensed consolidated balance sheet as of June 30, 2011 gives pro forma effect to the following transactions as if such transactions occurred on June 30, 2011:
· The modifications of the terms of our credit agreement;
· The business combination with Osterman; and,
· The business combination with SemStream.
The accompanying unaudited pro forma condensed consolidated statement of operations for the year ended March 31, 2011 gives pro forma effect to the following transactions as if such transactions occurred on April 1, 2010:
· Our combination with NGL Supply, Hicks LLC and Gifford;
· Our initial public offering;
· The modifications of the terms of our credit agreement;
· The business combination with Osterman; and,
· The business combination with SemStream.
The accompanying unaudited pro forma condensed consolidated statement of operations for the three months ended June 30, 2011 gives pro forma effect to the following transactions as if such transactions occurred on April 1, 2011:
· Our initial public offering;
· The modifications of the terms of our credit agreement;
· The business combination with Osterman; and,
· The business combination with SemStream.
Business Combination with Hicksgas
We purchased the retail propane operations of Hicksgas in October 2010 as part of our formation transactions. The following table presents the final allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their fair values, in the acquisition of the retail propane businesses of Hicksgas described above (in thousands):
|
Accounts receivable |
|
$ |
5,669 |
|
|
Propane inventory |
|
6,182 |
| |
|
Other current assets |
|
2,600 |
| |
|
Property, plant and equipment: |
|
|
| |
|
Land |
|
2,666 |
| |
|
Tanks and other retail propane equipment (15 years) |
|
23,016 |
| |
|
Vehicles (5 years) |
|
6,599 |
| |
|
Buildings (30 years) |
|
7,053 |
| |
|
Other equipment (5 years) |
|
523 |
| |
|
Amortizable intangible assets: |
|
|
| |
|
Customer relationships (15 years) |
|
2,170 |
| |
|
Non-compete agreements (5 years) |
|
550 |
| |
|
Tradenames (indefinite life) |
|
830 |
| |
|
Goodwill, retail propane segment |
|
3,716 |
| |
|
Total assets |
|
61,574 |
| |
|
|
|
|
| |
|
Accounts payable |
|
1,837 |
| |
|
Customer advances and deposits |
|
12,089 |
| |
|
Accrued and other current liabilities |
|
2,152 |
| |
|
|
|
16,078 |
| |
|
|
|
|
| |
|
Long-term debt |
|
5,768 |
| |
|
Other long-term liabilities |
|
274 |
| |
|
Total liabilities assumed |
|
22,120 |
| |
|
|
|
|
| |
|
Net assets acquired |
|
$ |
39,454 |
|
The Hicksgas acquisition accounting was based on the estimated fair value of the assets acquired and liabilities assumed, based primarily on an independent appraisal completed in July 2011. The assets acquired and liabilities assumed in the Hicksgas combination are included in our historical consolidated balance sheet since October 1, 2010 and the operations of Hicksgas have been included in our consolidated statement of operations since October 1, 2010. Additional information related to our business combination with Hicksgas is available in our Form 10-K for the year ended March 31, 2011.
Initial Public Offering
During May 2011, we sold a total of 4,025,000 common units (including the exercise by the underwriters of their option to purchase additional common units from us) in our initial public offering at $21 per unit. Our proceeds from the sale of 3,850,000 common units of approximately $72.0 million, net of total offering costs of approximately $9.0 million, were used to repay advances under our acquisition credit facility and for general partnership purposes. Proceeds from the sale of 175,000 common units ($3.4 million) from the underwriters’ exercise of their option to purchase additional common units from us were used to redeem 175,000 of the common units outstanding prior to our initial public offering. The advances under our acquisition credit facility were used to fund our business combination with NGL Supply and Hicksgas. Additional information related to our initial public offering is available in our Form 10-K for the year ended March 31, 2011 and our Form 10-Q for the three months ended June 30, 2011.
Immediately prior to our initial public offering we executed the following unit transactions:
· Effected a 3.7219 to one split of our common units; and,
· Converted 5,919,346 of our post-split common units to subordinated units.
Modification of Credit Facility
We expanded our revolving credit facility in August 2011. Presently, our revolving credit facility provides for a total credit facility of $330 million, represented by a $130 million working capital facility and a $200 million acquisition facility. Borrowings under the working capital facility are subject to a defined borrowing base. The borrowing base is determined in part by reference to certain trade position reports and mark-to-market reports delivered to the administrative agent and is subject to immediate adjustment for reductions in certain components of those reports. A reduction to the borrowing base could require us to repay indebtedness in excess of the borrowing base. In addition, three times per year, we can elect to reallocate up to $75 million of our acquisition facility to the working capital facility. During October 2011, we elected to reallocate $50 million from our acquisition facility to our working capital facility.
Subsequent to June 30, 2011, we have borrowed approximately $107 million under our acquisition facility and an additional approximately $126 million under our working capital facility primarily in connection with our acquisitions of Osterman and SemStream and to fund our seasonal inventory build. At December 5, 2011, we had outstanding borrowings of $138.2 million (including outstanding letters of credit of $14.2 million) and $107.0 million under our working capital and acquisition facility, respectively.
Our revolving credit facility has a final maturity on October 1, 2016. However, a total of $30 million of our working capital facility matures in February 2012. In addition to customary mandatory prepayment restrictions, once a year, we must reduce the outstanding working capital revolving loans and collateralize outstanding letters of credit to less than $10.0 million for 30 consecutive days.
Additional information related to our credit agreement is available in our Form 10-Q for the three months ended June 30, 2011.
Osterman Combination
On August 15, 2011, we entered into the business combination agreement with Osterman for retail propane operations in the northeastern United States to expand our retail propane operations. The agreement closed on October 3, 2011 and was funded with cash of $96 million and the issuance of four million common units, and also contemplates a working capital payment post closing for certain specified working capital items that might be payable to the Partnership or Osterman. The cash payments were funded with advances under our acquisition facility. We have valued the four million common units at $20.47 per unit, the closing price of our common units on the closing date. We also incurred and charged to general and administrative expense subsequent to June 30, 2011 approximately $530,000 of costs incurred in connection with the Osterman transaction that cannot be capitalized under GAAP.
Our total consideration paid in the Osterman combination consists of the following (in thousands):
|
Cash |
|
$ |
96,000 |
|
|
Common units |
|
81,880 |
| |
|
|
|
$ |
177,880 |
|
We will include the results of Osterman’s operations in our consolidated financial statements beginning October 3, 2011. As discussed further below, we have not completed the initial accounting for the Osterman business combination. We are in the process of identifying, and obtaining an independent appraisal of, the fair value of the assets acquired in the combination. We expect to complete this process prior to our year end of March 31, 2012. On a preliminary basis, we have estimated the fair values of the acquired assets and liabilities as follows (in thousands):
|
Cash |
|
$ |
2,492 |
|
|
Accounts receivable |
|
2,955 |
| |
|
Inventory |
|
3,981 |
| |
|
Prepaid expenses |
|
637 |
| |
|
Property, plant and equipment |
|
97,520 |
| |
|
Intangible assets |
|
73,479 |
| |
|
Assumed current liabilities |
|
(3,184 |
) | |
|
|
|
$ |
177,880 |
|
These estimates of fair value are preliminary and are subject to change as additional information is obtained, including the impact of the post closing working capital settlement which has not been completed at the date of this filing. Such changes could be material. Additional information as to the fair value estimates is provided in Note 2 to the unaudited pro forma condensed consolidated financial statements.
SemStream Combination
On August 31, 2011, we entered into a business combination agreement with SemStream and closed the transaction on November 1, 2011. We entered into this business combination to expand our midstream and wholesale supply and marketing operations. SemStream contributed substantially all of its natural gas liquids business and assets to us in exchange for 8,932,031 of our common units and a cash payment of approximately $93 million, which we funded with $10 million from our acquisition facility and $83 million from our working capital facility. We have valued the 8.9 million limited partner common units at the closing price of our common units on the combination closing date reduced by the effect of the units which are not eligible for full distributions until the quarter ending September 30, 2012 (see Note 5 to the unaudited pro forma condensed consolidated financial statements). The agreement also contemplates a working capital payment post closing for certain specified working capital items that might be payable to the Partnership or SemStream. In addition, in exchange for a cash contribution, SemStream acquired a 7.5% interest in our general partner. We incurred and charged to general and administrative expense subsequent to June 30, 2011 approximately $539,000 of costs related to the SemStream transaction that cannot be capitalized under GAAP.
The assets comprise 12 natural gas liquids terminals in Arizona, Arkansas, Indiana, Minnesota, Missouri, Montana, Washington and Wisconsin, 12 million gallons of above ground propane storage,
3.7 million barrels of underground leased storage for natural gas liquids and a rail fleet of approximately 350 leased and 12 owned cars and approximately $113 million of natural gas liquids inventory.
Our total consideration paid in the SemStream combination consists of the following (in thousands):
|
Cash |
|
$ |
93,054 |
|
|
Common units |
|
184,775 |
| |
|
|
|
$ |
277,829 |
|
We will include the results of SemStream’s operations in our consolidated financial statements beginning November 1, 2011. We have not completed the initial accounting for the business combination. We are beginning the process of identifying, and obtaining an independent appraisal of, the fair value of the assets acquired in the business combination. We expect to complete this process prior to our year end of March 31, 2012. On a preliminary basis, we have estimated the fair values of the acquired assets and liabilities as follows (in thousands):
|
Inventory |
|
$ |
113,471 |
|
|
Derivative financial instruments |
|
2,250 |
| |
|
Prepaid expenses |
|
3,572 |
| |
|
Property, plant and equipment |
|
72,703 |
| |
|
Intangible assets |
|
18,500 |
| |
|
Goodwill |
|
68,113 |
| |
|
Assumed liabilities |
|
(780 |
) | |
|
|
|
$ |
277,829 |
|
These estimates of fair value are preliminary and are subject to change as additional information is obtained, including the impact of the post closing working capital settlement which has not been completed at the date of this filing. Such changes could be material. Additional information as to the fair value estimates is provided in Note 2 to the unaudited pro forma condensed consolidated financial statements.
Pro Forma Financial Statements
The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and should be read in conjunction with the audited and unaudited historical financial statements of NGL Supply, Hicks LLC and Gifford which were included in our Form S-1, the audited and unaudited historical financial statements of Osterman included in our Form 8-K/A filed on December 19, 2011, the audited and unaudited historical financial statements of SemStream included in this Form 8-K/A, our Form 10-K for the year ended March 31, 2011 and our Form 10-Q for the three months ended June 30, 2011. The unaudited pro forma condensed consolidated financial statements include the following:
· The unaudited pro forma condensed consolidated balance sheet of NGL Energy Partners LP as of June 30, 2011 as if the modification of our credit agreement and combination transactions with Osterman and SemStream occurred on June 30, 2011;
· The unaudited pro forma condensed consolidated statement of operations of NGL Energy Partners LP for the year ended March 31, 2011 as if the combination transactions with NGL Supply, Hicks LLC, Gifford, Osterman and SemStream, our initial public offering and the modification of our credit agreement, had occurred on April 1, 2010; and,
· The unaudited pro forma condensed consolidated statement of operations of NGL Energy Partners LP for the three months ended June 30, 2011 as if the combination transactions with Osterman and SemStream, our initial public offering and the modification of our credit agreement had occurred on April 1, 2011.
The following unaudited pro forma condensed consolidated financial statements are based on certain assumptions and do not purport to be indicative of the results which actually would have been achieved if the combination transactions with NGL Supply, Hicks LLC, Gifford, Osterman and SemStream and our initial public offering and related equity issuances and the modification of our credit agreement had been completed on the dates indicated. Moreover, they do not project NGL Energy’s financial position or results of operations for any future date or period.
The accompanying pro forma condensed consolidated financial statements reflect asset and liability fair value estimates which are preliminary as our identification of the assets and liabilities acquired, and the fair value determinations thereof, for the Osterman and SemStream business combinations reflected in the pro forma statements have not been completed. We have engaged an independent appraisal firm to prepare an appraisal of the assets and liabilities acquired in those combinations. We expect to complete such appraisal and fair value determination by our fiscal year end of March 31, 2012. The fair value determination is also impacted by the amount of current assets and liabilities due to working capital adjustment provisions contained in the respective combination agreements. The fair value estimates reflected in the accompanying pro forma condensed consolidated financial statements are based on the best estimates available at this time and on the unaudited balance sheets of Osterman and SemStream as of June 30, 2011. There is no guarantee that the preliminary fair value estimates, and consequently the pro forma condensed consolidated financial statements, will not change. To the extent that the final combination accounting results in an increased allocation to goodwill, this amount would not be subject to amortization, but would be subject to an annual impairment testing and if necessary, written-down to a lower fair value should circumstances warrant. To the extent the final combination accounting results in a decrease to the preliminary computation of goodwill done for the purpose of preparing these pro forma financial statements, the amount would be subject to depreciation or amortization which would result in a decrease to the estimated pro forma income reflected in the accompanying pro forma condensed consolidated statements of operations for the respective periods.
NGL ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2011
US DOLLARS IN THOUSANDS
|
|
|
|
|
|
|
|
|
Pro Forma Adjustments |
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit |
|
|
|
|
| |||||||
|
|
|
Historical As of June 30, 2011 |
|
|
|
Note |
|
|
|
Note |
|
Agreement |
|
Note |
|
NGL |
| |||||||||||
|
|
|
NGL |
|
Osterman |
|
SemStream |
|
Osterman |
|
2 |
|
SemStream |
|
2 |
|
Modification |
|
2 |
|
Pro Forma |
| |||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Cash and cash equivalents |
|
$ |
8,721 |
|
$ |
22,114 |
|
$ |
— |
|
$ |
82 |
|
(a) |
|
$ |
185 |
|
(c) |
|
|
|
|
|
$ |
11,426 |
| |
|
|
|
|
|
|
|
|
|
(19,622 |
) |
(a) |
|
(54 |
) |
(c) |
|
|
|
|
|
|
| |||||||
|
Accounts receivable- trade |
|
48,083 |
|
7,915 |
|
37,382 |
|
(4,960 |
) |
(a) |
|
(37,382 |
) |
(c) |
|
|
|
|
|
51,038 |
| |||||||
|
Accounts receivable- affiliates |
|
295 |
|
6,222 |
|
— |
|
(6,222 |
) |
(a) |
|
— |
|
|
|
|
|
|
|
295 |
| |||||||
|
Inventories |
|
53,121 |
|
3,762 |
|
60,715 |
|
219 |
|
(a) |
|
52,756 |
|
(c) |
|
|
|
|
|
170,573 |
| |||||||
|
Derivative assets |
|
— |
|
— |
|
9,273 |
|
— |
|
|
|
(7,023 |
) |
(c) |
|
|
|
|
|
2,250 |
| |||||||
|
Margin deposits |
|
— |
|
— |
|
5,158 |
|
— |
|
|
|
(5,158 |
) |
(c) |
|
|
|
|
|
— |
| |||||||
|
Product exchanges |
|
416 |
|
— |
|
— |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
416 |
| |||||||
|
Prepaid expenses and other current assets |
|
2,487 |
|
1,295 |
|
1,733 |
|
(658 |
) |
(a) |
|
1,839 |
|
(c) |
|
|
|
|
|
6,696 |
| |||||||
|
Total current assets |
|
113,123 |
|
41,308 |
|
114,261 |
|
(31,161 |
) |
|
|
5,163 |
|
|
|
— |
|
|
|
242,694 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Property, Plant and Equipment, net |
|
65,706 |
|
18,762 |
|
47,306 |
|
78,758 |
|
(a) |
|
25,397 |
|
(c) |
|
|
|
|
|
235,929 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Goodwill |
|
8,568 |
|
380 |
|
50,071 |
|
(380 |
) |
(a) |
|
18,042 |
|
(c) |
|
|
|
|
|
76,681 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Intangible Assets, net |
|
11,271 |
|
3,542 |
|
12,787 |
|
69,937 |
|
(a) |
|
5,713 |
|
(c) |
|
|
|
|
|
103,250 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Other Long-Term Assets |
|
— |
|
225 |
|
3,042 |
|
(225 |
) |
(a) |
|
(3,042 |
) |
(c) |
|
|
|
|
|
— |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total assets |
|
$ |
198,668 |
|
$ |
64,217 |
|
$ |
227,467 |
|
$ |
116,929 |
|
|
|
$ |
51,273 |
|
|
|
$ |
— |
|
|
|
$ |
658,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
LIABILITIES AND PARTNERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Trade accounts payable |
|
$ |
49,315 |
|
$ |
3,720 |
|
$ |
38,191 |
|
$ |
(1,873 |
) |
(a) |
|
$ |
(38,191 |
) |
(c) |
|
|
|
|
|
$ |
51,162 |
| |
|
Accrued expenses and other payables |
|
5,117 |
|
1,529 |
|
2,195 |
|
(317 |
) |
(a) |
|
(1,415 |
) |
(c) |
|
|
|
|
|
7,109 |
| |||||||
|
Derivative liabilities |
|
— |
|
— |
|
12,836 |
|
— |
|
|
|
(12,836 |
) |
(c) |
|
|
|
|
|
— |
| |||||||
|
Product exchanges |
|
7,423 |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
7,423 |
| |||||||
|
Advance payments received from customers |
|
15,545 |
|
1,774 |
|
— |
|
(1,649 |
) |
(a) |
|
|
|
|
|
|
|
|
|
15,670 |
| |||||||
|
Current maturities of long-term debt (Note 4) |
|
1,830 |
|
156 |
|
— |
|
(156 |
) |
(a) |
|
|
|
|
|
83,000 |
|
(e) |
|
84,830 |
| |||||||
|
Total current liabilities |
|
79,230 |
|
7,179 |
|
53,222 |
|
(3,995 |
) |
|
|
(52,442 |
) |
|
|
83,000 |
|
|
|
166,194 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Long-Term Debt, net of current maturities (Note 4) |
|
10,376 |
|
1,624 |
|
— |
|
96,000 |
|
(a) |
|
93,000 |
|
(c) |
|
(83,000 |
) |
(e) |
|
116,376 |
| |||||||
|
|
|
|
|
|
|
|
|
(1,624 |
) |
(a) |
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Other Non-Current Liabilities |
|
370 |
|
348 |
|
167 |
|
(348 |
) |
(a) |
|
(167 |
) |
(c) |
|
|
|
|
|
370 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Partners’ Equity (Note 5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
General partner |
|
146 |
|
|
|
|
|
82 |
|
(a) |
|
185 |
|
(c) |
|
|
|
|
|
413 |
| |||||||
|
Limited partners- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Common units |
|
86,545 |
|
|
|
|
|
81,880 |
|
(a) |
|
184,775 |
|
(c) |
|
|
|
|
|
353,200 |
| |||||||
|
Subordinated units |
|
21,940 |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
21,940 |
| |||||||
|
Accumulated other comprehensive income |
|
61 |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
61 |
| |||||||
|
Total partners’ equity |
|
108,692 |
|
— |
|
— |
|
81,962 |
|
|
|
184,960 |
|
|
|
— |
|
|
|
375,614 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Equity of Combined Businesses |
|
— |
|
55,066 |
|
174,078 |
|
(55,066 |
) |
(b) |
|
(174,078 |
) |
(d) |
|
— |
|
|
|
— |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total liabilities and partners’ equity |
|
$ |
198,668 |
|
$ |
64,217 |
|
$ |
227,467 |
|
$ |
116,929 |
|
|
|
$ |
51,273 |
|
|
|
$ |
— |
|
|
|
$ |
658,554 |
|
See accompanying notes.
NGL ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2011
US DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
|
|
|
Historical |
|
|
|
Preliminary |
| |||||||||||||||||||
|
|
|
NGL |
|
NGL Supply |
|
Hicks LLC |
|
Gifford |
|
Pro Forma Adjustments |
|
Pro Forma |
| |||||||||||||
|
|
|
Six Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
Combination |
|
Note |
|
Offering |
|
Note |
|
NGL |
| |||||||
|
|
|
March 31, 2011 |
|
September 30, 2010 |
|
September 30, 2010 |
|
September 30, 2010 |
|
Transaction |
|
2 |
|
Transaction |
|
2 |
|
To Page 2 of 2 |
| |||||||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Retail propane |
|
$ |
72,813 |
|
$ |
6,868 |
|
$ |
18,339 |
|
$ |
4,583 |
|
$ |
(2,349 |
) |
(f) |
|
|
|
|
|
$ |
100,254 |
| |
|
Wholesale supply and marketing |
|
546,782 |
|
309,029 |
|
— |
|
— |
|
(595 |
) |
(f) |
|
|
|
|
|
855,216 |
| |||||||
|
Midstream |
|
2,637 |
|
1,046 |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
3,683 |
| |||||||
|
|
|
622,232 |
|
316,943 |
|
18,339 |
|
4,583 |
|
(2,944 |
) |
|
|
— |
|
|
|
959,153 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
COST OF SALES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Retail propane |
|
46,985 |
|
4,749 |
|
11,520 |
|
2,622 |
|
(2,349 |
) |
(f) |
|
|
|
|
|
63,527 |
| |||||||
|
Wholesale supply and marketing |
|
535,755 |
|
305,965 |
|
— |
|
— |
|
(595 |
) |
(f) |
|
|
|
|
|
841,125 |
| |||||||
|
Midstream |
|
292 |
|
194 |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
486 |
| |||||||
|
|
|
583,032 |
|
310,908 |
|
11,520 |
|
2,622 |
|
(2,944 |
) |
|
|
— |
|
|
|
905,138 |
| |||||||
|
Gross Margin |
|
39,200 |
|
6,035 |
|
6,819 |
|
1,961 |
|
— |
|
|
|
— |
|
|
|
54,015 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Operating and general and administrative |
|
20,922 |
|
8,441 |
|
9,306 |
|
2,869 |
|
(2,064 |
) |
(g) |
|
|
|
|
|
39,474 |
| |||||||
|
Depreciation and amortization |
|
3,441 |
|
1,389 |
|
1,061 |
|
150 |
|
689 |
|
(h) |
|
|
|
|
|
6,730 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Operating Income (Loss) |
|
14,837 |
|
(3,795 |
) |
(3,548 |
) |
(1,058 |
) |
1,375 |
|
|
|
— |
|
|
|
7,811 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Interest expense |
|
(2,482 |
) |
(372 |
) |
(240 |
) |
(3 |
) |
|
|
|
|
120 |
|
(l) |
|
(1,187 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Other, net |
|
324 |
|
190 |
|
87 |
|
54 |
|
|
|
|
|
1,790 |
|
(m) |
|
655 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Income (Loss) Before Income Taxes |
|
12,679 |
|
(3,977 |
) |
(3,701 |
) |
(1,007 |
) |
1,375 |
|
|
|
1,910 |
|
|
|
7,279 |
| |||||||
|
INCOME TAX (PROVISION) BENEFIT |
|
— |
|
1,417 |
|
1,845 |
|
|
|
(3,262 |
) |
(i) |
|
|
|
|
|
— |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
NET INCOME (LOSS) |
|
12,679 |
|
(2,560 |
) |
(1,856 |
) |
(1,007 |
) |
(1,887 |
) |
|
|
1,910 |
|
|
|
7,279 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
INCOME (LOSS) ALLOCABLE TO GENERAL PARTNER |
|
13 |
|
|
|
|
|
|
|
(8 |
) |
(j) |
|
2 |
|
(n) |
|
7 |
| |||||||
|
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST |
|
— |
|
45 |
|
|
|
|
|
(45 |
) |
(k) |
|
|
|
|
|
— |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
NET INCOME (LOSS) ALLOCABLE TO LIMITED PARTNERS |
|
$ |
12,666 |
|
$ |
(2,515 |
) |
$ |
(1,856 |
) |
$ |
(1,007 |
) |
$ |
(1,924 |
) |
|
|
$ |
1,908 |
|
|
|
$ |
7,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Basic and Diluted Earnings per Unit (Note 3) - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Common |
|
$ |
1.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Subordinated |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Weighted Average Units Outstanding - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Common |
|
10,933,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Subordinated |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
See accompanying notes and continuation on Page 2 of 2.
NGL ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2011
US DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
|
|
|
Preliminary |
|
Historical |
|
|
|
|
|
|
|
|
|
Pro Forma |
| ||||||||
|
|
|
Pro Forma |
|
Osterman |
|
SemStream |
|
Pro Forma Adjustments |
|
NGL |
| ||||||||||||
|
|
|
NGL |
|
12 Mo. Ended |
|
Year Ended |
|
|
|
Note |
|
|
|
Note |
|
Year Ended |
| ||||||
|
|
|
From Page 1 of 2 |
|
March 31, 2011 |
|
December 31, 2010 |
|
Osterman |
|
2 |
|
SemStream |
|
2 |
|
March 31, 2011 |
| ||||||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Retail propane |
|
$ |
100,254 |
|
$ |
105,061 |
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
|
$ |
205,315 |
| |
|
Wholesale supply and marketing |
|
855,216 |
|
— |
|
707,405 |
|
|
|
|
|
(56,768 |
) |
(s) |
|
1,505,853 |
| ||||||
|
Midstream |
|
3,683 |
|
— |
|
7,059 |
|
|
|
|
|
— |
|
|
|
10,742 |
| ||||||
|
|
|
959,153 |
|
105,061 |
|
714,464 |
|
— |
|
|
|
(56,768 |
) |
|
|
1,721,910 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
COST OF SALES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Retail propane |
|
63,527 |
|
64,076 |
|
— |
|
|
|
|
|
— |
|
|
|
127,603 |
| ||||||
|
Wholesale supply and marketing |
|
841,125 |
|
— |
|
691,823 |
|
|
|
|
|
(56,768 |
) |
(s) |
|
1,476,180 |
| ||||||
|
Midstream |
|
486 |
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
486 |
| ||||||
|
|
|
905,138 |
|
64,076 |
|
691,823 |
|
— |
|
|
|
(56,768 |
) |
|
|
1,604,269 |
| ||||||
|
Gross Margin |
|
54,015 |
|
40,985 |
|
22,641 |
|
— |
|
|
|
— |
|
|
|
117,641 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Operating and general and administrative |
|
39,474 |
|
21,549 |
|
15,095 |
|
|
|
|
|
— |
|
|
|
76,118 |
| ||||||
|
Depreciation and amortization |
|
6,730 |
|
3,752 |
|
5,040 |
|
4,686 |
|
(o) |
|
177 |
|
(t) |
|
20,385 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Operating Income |
|
7,811 |
|
15,684 |
|
2,506 |
|
(4,686 |
) |
|
|
(177 |
) |
|
|
21,138 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Interest expense |
|
(1,187 |
) |
(191 |
) |
(3,703 |
) |
(5,501 |
) |
(p) |
|
(1,714 |
) |
(u) |
|
(12,296 |
) | ||||||
|
Other, net |
|
655 |
|
(218 |
) |
2,983 |
|
|
|
|
|
|
|
|
|
3,420 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Income (Loss) Before Income Taxes |
|
7,279 |
|
15,275 |
|
1,786 |
|
(10,187 |
) |
|
|
(1,891 |
) |
|
|
12,262 |
| ||||||
|
INCOME TAX (PROVISION) BENEFIT |
|
— |
|
(502 |
) |
— |
|
502 |
|
(q) |
|
|
|
|
|
— |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
NET INCOME (LOSS) |
|
7,279 |
|
14,773 |
|
1,786 |
|
(9,685 |
) |
|
|
(1,891 |
) |
|
|
12,262 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
INCOME ALLOCABLE TO GENERAL PARTNER |
|
7 |
|
|
|
|
|
5 |
|
(r) |
|
— |
|
|
|
12 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
NET INCOME (LOSS) ALLOCABLE TO LIMITED PARTNERS |
|
$ |
7,272 |
|
$ |
14,773 |
|
$ |
1,786 |
|
$ |
(9,690 |
) |
|
|
$ |
(1,891 |
) |
|
|
$ |
12,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Basic and Diluted Earnings per Unit (Note 3) - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.44 |
| |||||
|
Subordinated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.44 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Weighted Average Units Outstanding - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,796,253 |
| ||||||
|
Subordinated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,919,346 |
| ||||||
See accompanying notes.
NGL ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2011
US DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
|
|
|
Three Months Ended June 30, 2011 |
|
Pro Forma Adjustments |
|
|
| |||||||||||||||||||||
|
|
|
Historical |
|
Historical |
|
Historical |
|
|
|
Note |
|
|
|
Note |
|
Offering |
|
Note |
|
NGL |
| |||||||
|
|
|
NGL |
|
Osterman |
|
SemStream |
|
Osterman |
|
2 |
|
SemStream |
|
2 |
|
Transaction |
|
2 |
|
Pro Forma |
| |||||||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Retail propane |
|
$ |
12,852 |
|
$ |
18,632 |
|
$ |
— |
|
|
|
|
|
$ |
— |
|
|
|
|
|
|
|
$ |
31,484 |
| ||
|
Wholesale supply and marketing |
|
177,497 |
|
— |
|
124,353 |
|
|
|
|
|
(13,231 |
) |
(y) |
|
|
|
|
|
288,619 |
| |||||||
|
Midstream |
|
497 |
|
— |
|
976 |
|
|
|
|
|
— |
|
|
|
|
|
|
|
1,473 |
| |||||||
|
|
|
190,846 |
|
18,632 |
|
125,329 |
|
— |
|
|
|
(13,231 |
) |
|
|
|
|
|
|
321,576 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
COST OF SALES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Retail propane |
|
8,106 |
|
10,132 |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
18,238 |
| |||||||
|
Wholesale supply and marketing |
|
177,769 |
|
— |
|
128,870 |
|
|
|
|
|
(13,231 |
) |
(y) |
|
|
|
|
|
293,408 |
| |||||||
|
Midstream |
|
98 |
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
98 |
| |||||||
|
|
|
185,973 |
|
10,132 |
|
128,870 |
|
— |
|
|
|
(13,231 |
) |
|
|
|
|
|
|
311,744 |
| |||||||
|
Gross Margin |
|
4,873 |
|
8,500 |
|
(3,541 |
) |
— |
|
|
|
— |
|
|
|
|
|
|
|
9,832 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Operating and general and administrative |
|
9,178 |
|
4,937 |
|
4,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
18,483 |
| |||||||
|
Depreciation and amortization |
|
1,377 |
|
1,132 |
|
1,335 |
|
977 |
|
(v) |
|
(30 |
) |
(z) |
|
|
|
|
|
4,791 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Operating Income (Loss) |
|
(5,682 |
) |
2,431 |
|
(9,244 |
) |
(977 |
) |
|
|
30 |
|
|
|
|
|
|
|
(13,442 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Interest expense |
|
(1,301 |
) |
(94 |
) |
(464 |
) |
(1,318 |
) |
(w) |
|
(1,191 |
) |
(A) |
|
476 |
|
(C) |
|
(3,892 |
) | |||||||
|
Other, net |
|
211 |
|
(98 |
) |
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
86 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Income (Loss) Before Income Taxes |
|
(6,772 |
) |
2,239 |
|
(9,735 |
) |
(2,295 |
) |
|
|
(1,161 |
) |
|
|
476 |
|
|
|
(17,248 |
) | |||||||
|
INCOME TAX (PROVISION) BENEFIT |
|
— |
|
108 |
|
|
|
(108 |
) |
(x) |
|
|
|
|
|
|
|
|
|
— |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
NET INCOME (LOSS) |
|
(6,772 |
) |
2,347 |
|
(9,735 |
) |
(2,403 |
) |
|
|
(1,161 |
) |
|
|
476 |
|
|
|
(17,248 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
LOSS ALLOCABLE TO GENERAL PARTNER |
|
(7 |
) |
|
|
|
|
|
|
|
|
(11 |
) |
(B) |
|
|
|
|
|
(18 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
NET INCOME (LOSS) ALLOCABLE TO LIMITED PARTNERS |
|
$ |
(6,765 |
) |
$ |
2,347 |
|
$ |
(9,735 |
) |
$ |
(2,403 |
) |
|
|
$ |
(1,150 |
) |
|
|
$ |
476 |
|
|
|
$ |
(17,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Basic and Diluted Earnings per Unit (Note 3) - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Common |
|
$ |
(0.53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.62 |
) | |||||
|
Subordinated |
|
$ |
(0.53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.62 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Weighted Average Units Outstanding - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Common |
|
9,883,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,796,253 |
| |||||||
|
Subordinated |
|
2,927,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,919,346 |
| |||||||
See accompanying notes.
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1 — Basis of Presentation
See “— Introduction” for more information regarding the basis of presentation for our unaudited pro forma condensed consolidated financial statements.
The entities included in the unaudited pro forma condensed consolidated financial statements are identified as follows due to space limitations:
· NGL Energy Partners LP - “NGL”
· NGL Supply, Inc. - “NGL Supply”
· Hicks LLC
· Gifford
· Osterman Associated Companies - “Osterman”
· SemStream, L.P. - “SemStream”
The results of operations of Osterman for the twelve months ended March 31, 2011 were compiled by reducing the individual amounts for the year ended September 30, 2010 by the results for the six months ended March 31, 2010, and increasing the amounts for the six months ended March 31, 2011. The results of operations for the six month periods ended March 31, 2010 and 2011 are not separately included herein.
Note 2 — Pro Forma Adjustments
Our unaudited pro forma condensed consolidated financial statements reflect the impact of the following pro forma adjustments:
Balance Sheet as of June 30, 2011
Osterman Combination
(a) Represents the consideration paid in the combination and the resulting net adjustments to the historical net assets at June 30, 2011 to reflect the preliminary allocation of the Osterman acquisition cost based on the following estimate of the fair values of the assets acquired and liabilities assumed (in thousands):
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
|
|
|
Fair Value Estimates |
| |
|
Cash |
|
$ |
2,492 |
|
|
Accounts receivable |
|
2,955 |
| |
|
Propane and other inventory |
|
3,981 |
| |
|
Other current assets |
|
637 |
| |
|
Property, plant and equipment: |
|
|
| |
|
Land |
|
4,500 |
| |
|
Tanks and other retail propane equipment (20 years) |
|
65,000 |
| |
|
Vehicles (5 years) |
|
20,000 |
| |
|
Buildings (30 years) |
|
6,500 |
| |
|
Other equipment (5 years) |
|
1,520 |
| |
|
Amortizable intangible assets: |
|
|
| |
|
Customer relationships (20 years) |
|
68,479 |
| |
|
Tradenames (indefinite life) |
|
5,000 |
| |
|
Assumed current liabilities |
|
(3,184 |
) | |
|
Consideration paid |
|
$ |
177,880 |
|
See “— Osterman Combination” for additional information as to the consideration paid.
The pro forma adjustment to cash and cash equivalents and partners’ equity includes a contribution from our general partner of $82,000 in order to maintain its 0.1% interest in the Partnership.
(b) Reflects the elimination of the historical net equity of Osterman as of June 30, 2011.
SemStream Combination
(c) Represents the consideration paid in the combination and the resulting net adjustment to the historical net assets at June 30, 2011 to reflect the preliminary allocation of the SemStream acquisition cost based on the following estimate of the fair values of the assets acquired and liabilities assumed (in thousands):
|
|
|
Fair Value Estimates |
| |
|
Propane and other natural gas liquids inventory |
|
$ |
113,471 |
|
|
Derivative financial instruments |
|
2,250 |
| |
|
Other current assets |
|
3,572 |
| |
|
Property, plant and equipment: |
|
|
| |
|
Land |
|
3,267 |
| |
|
Tanks and terminals (30 years) |
|
60,321 |
| |
|
Vehicles (5 years) |
|
562 |
| |
|
Pipelines and related equipment (15 years) |
|
4,058 |
| |
|
Buildings (10 years) |
|
59 |
| |
|
Other (5 - 10 years) |
|
4,436 |
| |
|
Amortizable intangible assets: |
|
|
| |
|
Customer relationships (10 years) |
|
17,000 |
| |
|
Other (3 years) |
|
1,500 |
| |
|
Goodwill |
|
68,113 |
| |
|
Assumed current liabilities |
|
(780 |
) | |
|
Consideration paid |
|
$ |
277,829 |
|
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
See “— SemStream Combination” for additional information as to the consideration paid.
The pro forma adjustment to cash and cash equivalents and partners’ equity includes a contribution from our general partner of $185,000 in order to maintain its 0.1% interest in the Partnership.
(d) Reflects the elimination of the historical net equity of SemStream as of June 30, 2011.
Modification of Credit Agreement
(e) Reflects the reclassification of debt from long-term to current as a result of the modification of our credit agreement. As amended, our credit agreement provides that $30 million of our working capital facility matures in February 2012. In addition, the credit agreement provides that once per year, we must pay down our working capital facility to a minimum of $10 million. As a result, a total of approximately $84 million of pro forma working capital borrowing represents current maturities as of June 30, 2011 (see Note 4).
Statement of Operations for the Year Ended March 31, 2011
Hicksgas/NGL Supply Combination Transaction Adjustments
(f) Eliminates the effects of intercompany propane sales between Hicks LLC and Gifford and between NGL Supply and Hicks LLC on revenues and cost of sales.
(g) Reflects the elimination of expenses incurred directly in connection with our combination with NGL Supply and Hicksgas.
(h) The assets acquired in the Hicksgas combination are included in our historical balance sheet as of June 30, 2011. The final fair value determination was made using an independent appraisal of the tangible and intangible assets and the results of the working capital adjustment. The pro forma depreciation and amortization adjustment reflects the estimated net adjustment to historical Hicks LLC and Gifford depreciation and amortization expense resulting from the final fair value computation of property, plant and equipment, identifiable intangible assets and goodwill acquired in the combination. Goodwill is an indefinite-lived asset subject to annual tests for impairment, thus no amortization has been reflected in our unaudited pro forma condensed consolidated statement of operations for the amount allocated to goodwill.
(i) Reflects the elimination of the historical income tax expense or benefit of NGL Supply and Hicks LLC. NGL Supply and Hicks LLC each made elections to be treated as pass through entities for federal income tax purposes just prior to our combination.
(j) Reflects the general partner’s 0.1% share of the income of NGL Supply, Hicks and Gifford after the effect of the pro forma adjustments.
(k) Reflects the effect of the acquisition of the noncontrolling interest in the initial combination transactions with NGL Supply and Hicksgas.
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
Initial Public Offering Transaction Adjustments
(l) Reflects the elimination of historical interest expense related to the acquisition facility of NGL Supply prior to our combination transaction with NGL Supply.
(m) Reflects the elimination of our historical interest expense on the amount borrowed under our acquisition credit facility to finance the Hicksgas combination which was paid using the proceeds from our initial public offering.
(n) Represents the general partner’s 0.1% share of the pro forma adjustments for the initial public offering.
Osterman Combination Transaction Adjustments
(o) Reflects the increase in historical depreciation and amortization expense of the Osterman long-lived assets based on the estimated fair value of the assets contributed in the Osterman combination. The pro forma average depreciation and amortization rate based on the estimated fair value and useful lives of the long-lived assets is 6.77%. An increase in the estimated fair value of the long-lived assets of $1 million would result in an increase of approximately $68,000 of depreciation and amortization expense for the year ended March 31, 2011. See Note 2 (a) for the detail of the estimated fair values of the individual long-lived assets and their estimated useful life.
(p) Represents the additional interest expense resulting from the advances from our acquisition facility to finance the Osterman combination at the actual average interest rate of 5.73% for the year ended March 31, 2011. A change in the interest rate of 0.125% would result in a change of approximately $120,000 in interest expense.
(q) Represents the elimination of the historical income tax provision for Osterman.
(r) Represents the general partner’s 0.1% share of the Osterman income after the effect of the pro forma adjustments.
SemStream Combination Transaction Adjustments
(s) Represents the elimination of sales between NGL and SemStream.
(t) Reflects the increase in historical depreciation and amortization expense of the SemStream long-lived assets based on the estimated fair value of the assets contributed in the SemStream combination. The pro forma average depreciation and amortization rate based on the estimated fair value and useful lives of the long-lived assets is 5.97%. An increase in the estimated fair value of the long-lived assets of $1 million would result in an increase of approximately $60,000 of depreciation and amortization expense for the year ended March 31, 2011. See Note 2 (c) for the detail of the estimated fair values of the individual long-lived assets and their estimated useful life.
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
(u) Represents the additional interest expense resulting from the advances from our acquisition and working capital facilities to finance the SemStream combination at the weighted average interest rate for the year ended March 31, 2011 of 5.5% for the estimated period in which the advances would have been outstanding, one year for the acquisition facility and three months for the working capital facility. A change in the interest rate of 0.125% would result in a change of approximately $38,000 in interest expense.
Statement of Operations for the Three Months Ended June 30, 2011
Osterman Combination Transaction Adjustments
(v) Reflects the increase in historical depreciation and amortization expense of the Osterman long-lived assets based on the estimated fair value of the assets contributed in the Osterman combination. The pro forma average depreciation and amortization rate based on the estimated fair value and useful lives of the long-lived assets is 6.77%. An increase in the estimated fair value of the long-lived assets of $1 million would result in an increase of approximately $17,000 of depreciation and amortization expense for the three months ended June 30, 2011. See Note 2 (a) for the detail of the estimated fair values of the individual long-lived assets and their estimated useful life.
(w) Represents the additional interest expense resulting from the advances from our acquisition facility to finance the Osterman combination at the actual average interest rate of 5.49% for the three months ended June 30, 2011. A change in interest rate of 0.125% would result in a change of approximately $30,000 in interest expense for the three months ended June 30, 2011.
(x) Represents the elimination of the historical income tax provision for Osterman.
Semstream Combination Transaction Adjustments
(y) Represents the elimination of sales between NGL and SemStream.
(z) Reflects the increase in historical depreciation and amortization expense of the SemStream long-lived assets based on the estimated fair value of the assets contributed in the SemStream combination. The pro forma average depreciation and amortization rate based on the estimated fair value and useful lives of the long-lived assets is 5.97%. An increase in the estimated fair value of the long-lived assets of $1 million would result in an increase of approximately $15,000 of depreciation and amortization expense for the three months ended June 30, 2011. See Note 2 (c) for the detail of the estimated fair values of the individual long-lived assets and their estimated useful life.
(A) Represents the additional interest expense from the advances from our acquisition and working capital facilities to finance the SemStream combination at the actual weighted average interest rate of 5.1% for the three months ended June 30, 2011. A change in interest rate of 0.125% would result in a change of approximately $29,000 in interest expense for the three months ended June 30, 2011.
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
(B) Represents the general partner’s 0.1% share of the losses of SemStream after the effect of the pro forma adjustments.
Offering Transaction
(C) Reflects the elimination of our historical interest expense on the amount borrowed under our acquisition credit facility to finance the Hicksgas combination which was paid using the proceeds from our initial public offering.
Note 3 — Pro Forma Earnings per Unit Computation
Our net income for income statement presentation and partners’ capital purposes is allocated to our general partner and limited partners in accordance with their respective ownership interests, and in accordance with our partnership agreement after giving effect to priority income allocations for incentive distributions, if any, to our general partner (the holder of the incentive distribution rights) pursuant to our partnership agreement, which are declared and paid following the close of each quarter. These incentive distributions could result in less income allocable to the common and subordinated unitholders.
For purposes of computing pro forma basic and diluted net income per common and subordinated unit, we have assumed that (a) the minimum quarterly distributions would have been paid to all unitholders for all outstanding units for each quarter during the periods presented, and (b) there would be no incentive distributions to the general partner. Any earnings in excess of distributions are allocated to our general partner and limited partners based on their respective ownership interests.
The pro forma earnings per unit have been computed under the two-class method based on earnings or losses allocated to the limited partners after deducting the total earnings allocation to the general partner. The computation is based on the number of common and subordinated units outstanding after the Osterman and SemStream combinations. The pro forma basic and diluted earnings per unit are equal as there are no dilutive units.
Earnings per unit are computed as follows (dollars in thousands except per unit information):
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
|
|
|
Historical |
|
Year Ended |
|
Three Months Ended |
| ||||||
|
|
|
NGL Energy |
|
March 31, 2011 |
|
June 30, 2011 |
| ||||||
|
|
|
Six Months Ended |
|
Pro |
|
|
|
Pro |
| ||||
|
|
|
March 31, 2011 |
|
Forma |
|
Historical |
|
Forma |
| ||||
|
Net income (loss) |
|
$ |
12,679 |
|
$ |
12,262 |
|
$ |
(6,772 |
) |
$ |
(17,248 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
General partner 0.1% share of income (loss) |
|
13 |
|
12 |
|
(7 |
) |
(18 |
) | ||||
|
General partner incentive distributions |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income (loss) allocated to limited partners |
|
$ |
12,666 |
|
$ |
12,250 |
|
$ |
(6,765 |
) |
$ |
(17,230 |
) |
|
Common unitholders |
|
$ |
12,666 |
|
$ |
9,634 |
|
$ |
(5,219 |
) |
$ |
(13,550 |
) |
|
Subordinated unitholders |
|
$ |
— |
|
$ |
2,616 |
|
$ |
(1,546 |
) |
$ |
(3,680 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic and Diluted Earnings per Unit — |
|
|
|
|
|
|
|
|
| ||||
|
Common unitholders |
|
$ |
1.16 |
|
$ |
0.44 |
|
$ |
(0.53 |
) |
$ |
(0.62 |
) |
|
Subordinated unitholders |
|
$ |
— |
|
$ |
0.44 |
|
$ |
(0.53 |
) |
$ |
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted Average Units Outstanding — |
|
|
|
|
|
|
|
|
| ||||
|
Common |
|
10,933,568 |
|
21,796,253 |
|
9,883,342 |
|
21,796,253 |
| ||||
|
Subordinated |
|
— |
|
5,919,346 |
|
2,927,149 |
|
5,919,346 |
| ||||
For the pro forma earnings per unit computation, we have assumed that all units were outstanding during the entire period for each of the periods presented.
Note 4 — Long-Term Debt
Our historical and pro forma long-term debt as of June 30, 2011 are as follows:
|
|
|
Historical |
|
Pro Forma |
| ||
|
|
|
|
|
|
| ||
|
Working capital facility |
|
$ |
11,000 |
|
$ |
94,000 |
|
|
Acquisition facility |
|
— |
|
106,000 |
| ||
|
Other |
|
1,206 |
|
1,206 |
| ||
|
|
|
$ |
12,206 |
|
$ |
201,206 |
|
|
|
|
|
|
|
| ||
|
Less - Current maturities |
|
1,830 |
|
84,830 |
| ||
|
Long-term debt |
|
$ |
10,376 |
|
$ |
116,376 |
|
Note 5 — Partners’ Equity
Outstanding general and limited partner units on a historical and pro forma basis as of June 30, 2011 are as follows:
NGL ENERGY PARTNERS LP
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
|
|
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
|
|
|
General partner notional units |
|
14,799 |
|
27,744 |
|
|
Limited partner - |
|
|
|
|
|
|
Common units |
|
8,864,222 |
|
21,796,253 |
|
|
Subordinated units |
|
5,919,346 |
|
5,919,346 |
|
The four million common units issued in the Osterman combination are not eligible for distributions until the distribution for the quarter ending December 31, 2011. Of the 8,932,031 common units issued in the SemStream combination, (1) five million are eligible for 67% of the distribution for the quarter ending December 31, 2011 and full distributions thereafter, and (2) 3,932,031 common units are not eligible for distributions until the distribution for the quarter ending September 30, 2012.
Note 6 — Other Income of SemStream
Other income of SemStream in the unaudited pro forma condensed statement of operations for the year ended March 31, 2011 includes a $1.2 million gain on the settlement of a dispute related to the cancellation of a contract by a counterparty during 2008, and a gain of $1.2 million related to the settlement of a dispute related to certain transportation fees charged to SemStream by an unaffiliated party during the years 2005-2009. This non-recurring income is not excluded from pro forma income as it does not result directly from the SemStream combination. We do not expect to realize similar income in the future.